Call for food processing review

AN URGENT, fully independent review of Australia's competition and consumer law is needed, a Senate Select committee recommended on Thursday after nearly a year and a half considering problems in the food processing sector.

The inquiry looked into the competitiveness and the regulatory environment of the food processing industry, as well as the effectiveness of the Competition and Consumer Act.

Dominated by Opposition senators, the final 237-page inquiry report includes a dissenting report from government senators as well as a third report from independent Senator Nick Xenophon.

While the resounding majority of the committee recommended the Act be reviewed, Labor senators wrote that the government rejected such recommendations, partly on the grounds that recent government amendments to the legislation had not yet been tested in the courts.

The report, tabled in the Senate on Thursday, was the second time in two years that a Senate inquiry has recommended a full review of Australia's competition laws, on the back of the long-term increasing market dominance Coles and Woolworths hold over the nation's retail grocery market.

The dominance of the two major supermarket chains in the grocery sector was last estimated by IBISWorld at about 80% of the total market.

An earlier report from a 2011 Senate inquiry into pricing in the dairy industry on the back of Coles' decision to sell private brand milk for $1 a litre, also recommended the government take the same action.

But the official government response to the recommendation did not agree then either, citing the same reasons as the government Senators to the food processing inquiry.

The report said the committee had "no doubt that concentration in the Australian grocery retail sector is at unprecedented levels", primarily as a result of "creeping acquisitions".

"Creeping acquisitions are a series of small-scale acquisitions that, individually, do not 'substantially lessen competition' in a market, but collectively may do so over time," the report reads.

"Supermarkets have bought up 'small brands which on their own do not appear to be much' but which over time have built up to be 'quite substantial ownership of market power.

"Each of these small acquisitions is not in breach of section 50 (of the Act), and the series of acquisitions are therefore permissible by law."

The committee also noted what it called the "government's minor amendments" to the Act, but cast them aside as simply "placebo provisions".

"The review of the CCA should consider whether section 50 ensures that the cumulative effect of acquisitions over time is taken into account by the Australian Competition and Consumer Commission," it reads.

After the inquiry into pricing in the dairy industry found the dominance of the two supermarkets was affecting the prices milk producers were receiving, the latest inquiry also reveals that dominance is also affecting the next player in the nation's food supply chain - the food processing sector.

In submissions to the inquiry both Coles and Woolworths have said their increasing dominance of the market was not a concern, while Federal Treasury officials told the committee that the two supermarkets' control of 80% of the dry grocery market was not of itself a concern.

A Treasury official told the committee that the only concern was how the companies used their market share.The committee recommended the review should include: